If you’re a small business owner, you may find yourself so caught up in the daily operations of your company that retirement is the furthest thing from your mind. Or maybe you love your business so much that you plan to work until your last breath. These are understandable attitudes from a small business owner, but they won’t help you further down the road if you become ill or otherwise need to step away from your business.
As a small business owner, there are several options available that will make retirement an easier process for you. Here are 5 options to consider that will set you up for success in your later years.
First of all, you should of course be setting a financial goal and setting aside a little money each month. It may be difficult to set a realistic goal when you’re dedicated to your work and don’t expect to retire, but it’s important that you assess the cost of living and make sure you have a nest egg to turn to in an emergency.
There are also specific retirement savings accounts that can help you save money for retirement. Simple IRAs for example are specifically for small businesses and they not only help you save for retirement, but they allow you to help your employees save as well. A solo 401(k) might also be appropriate as a self-employed individual and a small business over.
If you’ve waited until after 50 to set up your retirement account, some plans will allow you to play catch-up, as it were. Rather than only setting aside a standard contribution each year, plans that allow this option let you add extra money to your account to make up for the years you weren’t saving. This can really help you create a more secure position if you’ve neglected to save until now.
When preparing for your retirement, it’s also important to assess the state of your business and whether or not it will leave your family in any kind of debt. If you are risking bankruptcy, you’ll need to plan for your retirement around this debt if you don’t want to wind up living in poverty.
401(k) plans are exempt from bankruptcy filings, but IRA accounts are only selectively exempt. Depending on how much you have already put away and how much money is needed to support yourself and your family, you may be required to claim IRA savings as assets in a bankruptcy claim.
Finally, you should always be communicating with your family when planning for retirement as a small business owner. If one or more of your children hope to inherit and continue the business, you’ll need to plan differently as you won’t be able to sell off the company to fund your retirement. In these cases, asking the relatives who hope to continue the business to help support your retirement is a reasonable request.
Saving for retirement is very important as social security payments are rarely enough for individuals to live on, especially not in the fashion of your current lifestyle. Now is the moment to stop, consider your business, your future health, and make a realistic plan for your golden years.